Investment Insights for the Muslim Travel Market [Interview]

1. What makes the Halal tourism sector so attractive for investors?

In business school you learn how to find a gap in the market and fulfil the needs of your target customer. You learn that the more differentiated your product is, and the more niche your market is, the higher the chances you have of succeeding and creating sustainable returns. Obviously, niche does not mean small. Niche means specialised.

The Halal tourism sector has the same business parameters for success. The Halal niche is not only specialised, it’s also very large as we have all seen from the studies by CrescentRating. One would therefore expect the investment community to be very interested in tapping into such market. Unfortunately, investors have been a little shy until now while some have only started showing interest in the last few years.

Shaza Hotels is a good example for being a pioneer in the field. The company was launched in 2010 to provide travellers with a very high-quality hotel accommodation within a respectful environment, offering the appropriate facilities and amenities for Muslims that would make their stay comfortable and compatible with their needs. Shaza is currently the only international hotel brand crafting its offering for the Halal-conscious market. No other hotel operator of our standard and with our expertise is doing this.

Now the question is why did it take investors so long to realise the potential of the Halal tourism industry? Why are we seeing this as a recent phenomenon? One of the reasons could be attributed to the boom of the travel and tourism industry in the last decade, and hence there has been more focus on this large overall market. Another reason could be that the travel market is now saturated with mainstream hotels and other components of the travel chain, so investors have started to look for other unique and differentiated markets that would allow them to generate higher returns rather than compete in a very busy market place. With this, Halal tourism has emerged as a very promising investment sector. So, it is probably a combination of many reasons, but despite the potential of the market, the investors’ appetite remains surprisingly low.

2. Do you think the current investment climate into the Halal travel space is adequate?

Unfortunately, it is not as adequate as one would expect. Despite the staggering numbers and the immense potential of the Halal travel space, investors remain cautious. They are adopting a wait and see attitude. They want to see how other - more entrepreneurial - investors perform in the sector before joining them.

I often share with others how challenging it is for a visionary group like Shaza to see the potential in developing hotels that are Halal-friendly and yet few investors have entered this space. We know there is demand. The problem is that there is very little supply. My role is to continuously promote our brand, find the interested investors, convince them to entrust Shaza with their asset.

3. Why should established brands in hospitality and tourism industry pay attention to the Muslim travel market?

A small part of me is hoping that they don’t, so that the pie remains bigger for Shaza Hotels! Jokes aside, the industry needs more players fulfilling the needs of Muslim travellers and offering a more diverse product across various segments. The market is large enough for hotel brands to enter the space and help us increase aware-ness about Halal-conscious hotels, especially in non-Muslim countries like France, Germany, Spain, the UK and even Japan. This will also encourage more investors to enter the Halal space.

Hotels always seek to attract a diverse market to fight seasonality and maintain sustainable RevPAR levels. The Halal market will do just that, and all it takes for existing hotel brands is a small effort to ensure that the basic needs of the market are met. What makes Shaza stand out is the fact that the brand is focusing only on Halal-conscious travellers in all our hotels worldwide and we are not satisfied with only offering the basic needs. We spent several years studying the market and developing a product that is authentic in its experience and contemporary in its delivery. I can proudly say that we are the first international hotel group that specialises in this market. This has allowed us to gain a strong competitive advantage in terms of market understanding, penetration and brand recognition.

4. In your opinion, which service sector stands to benefit most from the growing Halal tourism industry?

Restaurants may have been amongst the first businesses of the Halal tourism chain to provide Halal-certified food in non-Muslim countries. Travellers have often researched whether such places are available before even choosing a destination or a hotel. They want to ensure that they can find Halal food. Many airlines have followed in recent years by offering Halal dishes on their menu, and some hotels have started adapting their offering to provide essential amenities or different operating times of their restaurants during Ramadan.

Booking platforms and travel consultants have also emerged like HalalBooking and Serendipity. So various components of the travel chain have started to come together, but in my opinion, there is still room for growth in the Hotel sector. Some travellers will no longer be satisfied with hotels that simply provide basic amenities. There must be a deep understanding of the customs, cultures and beliefs in order to offer a service that is respectful, knowledgeable, and genuine. Hotels must offer a tailor-made experience and this is what Shaza is doing.

5. How important is innovation in the Muslim tourism space?

Innovation is important in any tourism space. Take technology for instance. Tourism is about creating memorable experiences and in today’s world experiences are often dependent on technology. Whether it is technology to share those experiences, technology to live those experiences, or technology to facilitate those experiences.

The Muslim tourism space is no different, especially when you realise that the largest part of the Muslim popula-tion that will dominate the Halal travel sector is the millennials. Technology to this generation is an essential part of life and any component of the tourism chain must embrace this fact. What makes innovation even more important to Muslim tourism is the fact that this space is new and growing fast. People have only recently started paying attention to that market and like anything new, the industry starts first by focusing on fulfilling the basic needs before looking at innovation and more advanced needs. So, there is room for growth.

Shaza has recently launched its upscale brand Mysk by Shaza to specifically cater to the Muslim millennials. A Halal-friendly accommodation, young, vibrant, focusing on smart technology. The brand has been very well received by the investment community and we have already opened our first Mysk hotel in Muscat, Oman, and signed two more in Dubai and Kuwait. We are also in advanced negotiations for a Mysk resort in Indonesia as we are now actively seeking to enter the South-East Asia markets.

6. As the Muslim travel market continues to mature, when is the right time for investors to get on board?

I believe the time to get on board was 10 years ago! Luckily for those who have just started inquiring about the market, there is still a great opportunity to do so since very few investors have tapped into the market in the last decade.

As I said earlier, there is demand but little supply. If you look at the hotel investment cycle, it takes sometimes one year to negotiate hotel agreements with an operator, six months to design a hotel, and two and a half years to build it. If an investor wants to enter the hotel business today, he is actually fulfilling a need in 2021. The investment returns begin to appear only four years from now. It is of course faster to acquire an existing hotel or convert a building into a hotel that meets the needs of the Halal-conscious traveller, but we have often seen that building hotels that are purposely designed to have the right facilities and configuration for our market is usually the preferred route of many investors.

At the end of the day, Halal-friendly hotels should not be only about Halal food and not serving alcohol. Any hotel can do this. For Shaza, it is about privacy, experience, guest flow, respect. These principles can only be achieved in a tailor-made hotel programme that must be purposely crafted for the Halal market.